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Equities market turmoil triggers sharp trading discount for US ETFs

Many US traders reported difficulty in correctly pricing exchange-traded funds during Monday’s equities rout, resulting in dozens of such instruments trading at sharp discounts to their net asset value, and consequently, outsized losses for investors who entered sell orders at the depth of the panic.

Several market participants said that circuit breakers sometimes exacerbated problems by preventing ETF prices from returning to normal levels quickly, with the result that the slide in prices of many of these halted funds exceeded the decline in the prices of their underlying holdings.

The $2.5bn Vanguard Consumer Staples Index ETF, which was halted six times over the course of 37 minutes early in the day, and the $5.8bn Vanguard Health Care Index ETF, which broke the circuit eight times, both plunged 32% within the opening minutes of trading.